3 Alternative Ways for Singapore SMEs to Get Funding

3 Alternative Ways for Singapore SMEs to Get Funding

by January 12, 2017

Singapore’s economy faced strong headwinds in 2016 and most key business indicators and economists have expressed pessimism for 2017.

The Singapore economy is “in for a tough period that will last for a while,” said deputy prime minister Tharman Shanmugaratnam in September, 2016, adding that the government’s priority right now was to help small and medium-sized enterprises (SMEs) innovate and “commercialize their capabilities beyond Singapore to take advantage of the growing regional opportunities.”

In Singapore, the high interest rates for bank loans, suppliers tightening credit access and the need for more and more collateral have become challenges for SMEs looking to raise funding, according to a recent survey.

Lincoln Teo, COO of DP Info, told the Business Times in November, 2016: “Banks and institutions have become more cautious about lending to SMEs, and this is reflected in a higher cost of funds.”

He added that the lack of access to affordable financing can trap SMEs in a “downward spiral,” as they are unable to grow without more funds, but at the time unable to get funds without more growth.

In an economic slowdown, one can use the help of a consultancy firm to get pragmatic solutions to their business needs. Singapore’s Linkflow Capital Pte Ltd provides advisory services to SMEs and assists companies with business process outsourcing of accounting and finance functions. The company can also procure financing from capital providers and operates the portal SMELoan.sg which lets you compare Singapore’s business loans providers easily.

But as the struggle for SMEs to secure bank loans gets worse, what other options are there for those in need of funding?

Today, we look at three alternative ways for SMEs to raise funds while avoiding bank loans.



Crowdfunding, a form of crowdsourcing and alternative finance, is the practice of funding a project or venture by raising money from a large number of people, mainly through dedicated online platforms.

Crowdfunding has gained popularity in recent years, growing from 400 platforms in 2012 to over 2,000 platforms in 2016, according to the Huffington Post.

There are four types of crowdfunding: reward-based, equity-based, debt-based (also referred to as peer-to-peer lending), and donation-based.

A number of platforms are available in Singapore including MoolahSense, one of the leading players in the field, but also FundedHere, which focuses on equity crowdfunding and lending-based crowdfunding. FundedHere is known for being the first platform to get a license in Singapore.


Invoice trading

Invoice trading is the process in which SMEs auction their outstanding invoices to obtain immediate cash. It is a source of business finance, which allows businesses to access working capital that would otherwise be locked away for months.

SMEs can sell their outstanding invoices individually or in bundles to the bidders who offer the most competitive price to advance them the money.

Investors purchase a business’ outstanding invoices at a discount through an online market like InvoiceInterchange or SmartFunding. Other platforms available in Singapore include Capital Match, which also offers business and SME loans, and Capital Springboard, a newcomer that launched in June 2016.


Government schemes and grants

According to SPRING Singapore, an agency under Singapore’s Ministry of Trade, there are currently 180,000 local SMEs, making up 99% of the enterprises in the nation. These contribute to nearly half of the GDP and employ 70% of the workforce.

Considering the importance of SMEs in the local economy, the Singapore government has launched a number of financial schemes to support these companies.

These schemes include the government’s SME Micro Loans under the Local Enterprise Finance Scheme (LEFS) available to local SMEs with ten or less employees. These can apply for micro loans of up to S$100,000 for a repayment period of up to four years.

The SME Equipment and Factory Loan will provide companies financing of up to S$15 million to purchase equipment, machines or selected factory properties.

The SME Working Capital Loan, introduced at the Singapore Budget 2016, allows businesses to access unsecured working capital financing of up to S$300,000 to support their day-to-day business operations. The special program is running for a period of three years and will end in May 2019.

The SME Venture Loan enables innovative, high-growth companies to access alternative financing of up to S$5 million for the purpose of business expansion. It is part of the Venture Debt Programme which was launched in January 2016 and which will be running for a pilot period of two years.

For early-stage tech startups, SPRING and the Action Community for Entrepreneurship (ACE) offer a number of incubation and acceleration programs, as well as special grants such as the ACE Startups grant and the Technology Enterprise Commercialisation Scheme, which provides early-stage funding for proofs-of-concept and proofs-of-value.


Featured image credit: Telok Ayer Market, Singapore via Unsplash